How Online Paywalls Are Changing Journalism

This is TALK OF THE NATION. I'm Neal Conan in Washington. Paywall skeptic Clay Shirky long maintained that barriers to newspaper websites were counterproductive and self-defeating, that online readers accustomed to getting the news for free would find another way or another source of news.

After a largely unsuccessful attempt at a paywall a few years ago, the New York Times introduced a revamped pay model in 2011. Signs are it might be working. Clay Shirky argues that's in part because some highly motivated subscribers are willing to pay and in part because advertisers seem to want access to those well-read minds.

And it's not just national newspapers like the Times and the Wall Street Journal. Local papers recognize that dwindling circulation means they're going to need online revenue if they want to keep covering city council, the zoning board and high school football.

So what about where you live? How do paywalls change things? 800-989-8255. Email talk@npr.org. You can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION. Later in the program, an Israeli attack on Iran on The Opinion Page this week.

But first, newspaper paywalls. Clay Shirky, an associate professor at NYU, joins us from our bureau in New York. Nice to have you back on the program.

CLAY SHIRKY: Thanks so much, Neal. Thanks for having me.

CONAN: And you wrote a piece on - called "The Year of the Paywall," which said 2012 might just be the year in which newspapers abandon the idea that all readers are customers.

SHIRKY: Right. I think the thing to understand about the model that's being tried now by the New York Times, by the Minneapolis Star-Tribune, by the Chicago Sun Times, finally gives up on the idea that every reader online can be treated as if they were someone who is purchasing the paper, the kind of online equivalent of someone who's purchasing the paper when it was just a physical product.

In fact, what all three of the papers are doing, and I think an increasing number of papers are copying them, is saying we will never get a majority or even a sizable minority of our readers to pay us directly, but we can design a system in which some of our most passionate, engaged readers pay us directly, and the rest of the readers, the casual readers, we can keep around for the advertising revenue.

And squaring that circle has been the hard conversation for the last really 15 years of paywalls. It looks like now maybe that we've got a solution that deals with both halves of that equation, both the user fees and the advertising.

CONAN: And you suspect that will change things in a number of interesting ways. We'll get to that in just a moment. But first, you - your conclusion is that most people who use the newspaper aren't necessarily reading the coverage of the Florida primary; they're checking the sports and the horoscopes.

SHIRKY: Right, I mean, you know, newspapers have always been a bundle, right? They have sections for a reason, and it's not to maximize the chance that a Mets fan is going to see news from the Honduras, right? There are people who go to the sports section first. There are people who go to the business section first. There are people who read only those things.

As long as the newspaper was a bundle, no one ever had to care that people were buying it for radically different reasons. But once you go online, and people can unbundle things, where you can traffic directly to a story without going through the home page or any of the rest of it, suddenly what it - the individual choices made by individual readers come to matter a lot.

And so online it became impossible, really impossible, to get the casual readers to behave like committed readers who would read every section or every story or what have you. In fact, if you graph what people are reading on any given newspaper, the absolute commonest pattern is the user who reads one article in a month.

And that's the bulk of the head count. If you raise even a small threshold, all of those people go away, you get a core of more loyal readers, but you lose a lot of people to advertise to.

CONAN: So if you raise the bar, say you can have 20 articles a month for free, you're going to get most of your readers still and the advertising that is directed to them. That'll still sell, but that's not going to pay a lot of your costs. You can, though, charge those motivated subscribers a fee, and it looks like they're going to be willing to pay for it.

SHIRKY: That's right, and it certainly - I mean, what we're seeing now - again with the Times, the Star-Tribune, the Sun Times - is that a small core of readers will come forward and support the paper. And this is I think a really interesting change because it isn't just, hey, we got a new source of money, which is always welcome in the newspaper world, but also because psychologically it moves the Times, the New York Times business model closer to NPR's, where a majority of listeners don't donate in any given year, but those of us who do sign up, become, you know, members, in my case WNYC, become members of their local station give money, are supporting the enterprise for the rest of the population.

So now the Times has this similar group of very committed users who are disproportionately supporting the paper for the rest of us.

CONAN: It's interesting. You wrote about that in this article: Lest NPR seem like small ball, it's worth noting, you write, that the Times has convinced something like one out of every 100 of its online readers to pay, while NPR affiliates' success rate is something like one in 12.

SHIRKY: Right.

CONAN: We've been at it a little longer than they have, but...

SHIRKY: Practice, practice makes perfect, yes.

CONAN: So nevertheless, that changes if you're appealing to core listeners and core readers. That changes your business.

SHIRKY: That does change your business because suddenly you care about the difference between the user who just happens to glance at an article and the user who's actually committed to the longevity of your institution.

Now, when you go to advertisers, typically in the open market, when it was just, you know, here's our Web traffic, an eyeball was an eyeball is an eyeball, as the phrase is in the online marketing world. But when you are actually deriving some of your revenues from users signing up to give you, in the Times' case five bucks a week, what that - what makes that user base loyal and what makes that user base recruit more users to become loyal suddenly becomes a business imperative.

That means you've got this small subset, as NPR has a core of users that support it, you've got now in these newspapers a small subset of their users who aren't just customers but are approaching a condition like members.

CONAN: Well, joining us now from a studio at the New York Times, where she's chief advertising officer, is Denise Warren; she's also general manager at NYTimes.com. Nice to have you with us today.

DENISE WARREN: Thanks for having me on the program, Neal.

CONAN: And I'm not sure you accept Clay Shirky's analogy, but if you get into the tote bag business, we're going to have a problem.

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WARREN: We sure will.

CONAN: Is this a reasonable analogy, that in fact you're getting a core audience who's willing to - I think Clay Shirky referred to it as the God forbid audience, the people who say God forbid the New York Times should go away.

WARREN: I think Clay has outlined it exactly right. I mean, this model was not designed to get everybody who comes to our website to pay. Clay is absolutely right in terms of the distribution of the audience, and I think this is true for most publishers. The vast majority of people come and turn one article or two articles.

But there is a very loyal minority of folks who told us through rounds and rounds of research that they value the New York Times content, they'd be willing to pay to support the New York Times content. And so the key for us in this model was threading that needle - remaining open to the Web, enabling those who are coming to us for that one article or two article, et cetera, to still enjoy the content but at the same time enable those who are very loyal to have some kind of a different experience with us.

CONAN: And threading the needle in terms of how many stories you can access for free per month and the price point.

WARREN: Yes, that's right. We did a tremendous amount of research in the lead-up to the launch of the pay model. And I want to just actually throw something out here, as well. We keep talking about the quote-unquote paywall, but I think it's important for your audience to understand that this was a holistic strategy, and it's across all of our digital platforms.

So it includes not only our website, but it includes our mobile devices, as well, and that is - you know, I think everybody knows is becoming increasingly an important way for folks to access content. And we're seeing some very interesting user behaviors as it relates to that. So it's important just to understand those distinctions.

But price became very important, understanding how our users were using the website, how many articles they were accessing; really setting the meter on the website at the exact right place really was the trick to the success that we've seen.

CONAN: Here's an email we have from Victoria: I love the New York Times and often thought I would pay for the information they were giving away for free. One day, while I was reading it online for free, I opened up an offer in the mail to pay for the delivered subscription and wondered why I would do that.

But now that they want me to pay for the online version, I'm hesitant. I've used up my 20 free articles this month. I'm waiting for February. I think they're charging too much(ph) , maybe $4.99 per month. After all, they don't incur any of the costs of printing and delivery.

WARREN: I think the New York Times journalism is extremely expensive, and it's very, very, very valuable. And again, our research suggests that users are willing to pay for that. We're giving users a number of different options in terms of how they'd like to pay for it. There's several different approaches.

One is the home delivery bundle, so to speak, which includes access to all of our content across all digital platforms. There is also, going to the other end of the spectrum, the opportunity to access our content just on the website and your smartphone device. That is a much lower cost than the home delivery. And then there's a variety of options in between.

CONAN: And then there's geezers like me who still get a newspaper on my driveway every morning. Clay Shirky, though, I wonder, she's talking about all the mobile apps. I wonder how much the smartphone and the tablet have changed this equation because they are so much more like the newspaper experience.

SHIRKY: Well, they've changed the equation less, I think, than you'd imagine. And in fact, I think one of the Times - one of the things the Times said in launching this, in launching their system - I don't like to call it a paywall because something that lets out most of the content, the wall isn't the right metaphor for it.

CONAN: Maybe a membrane then.

SHIRKY: Exactly, fair enough, right, semi-permeable membrane - that consumers are increasingly converging on their expected behaviors. And in fact the difference between the phone and the tablet and the computer are shrinking as the tablets and the phones get more capable.

So there was this thought originally that the tablet would be this kind of ideal walled garden, but unfortunately Apple also shipped it with a browser, and so the Web is still present and in fact more present in the mobile phone ecosystem than it has ever been before.

And so I think increasingly publishers are saying if we're printing something and then putting it on a truck and putting it in your driveway, as you said, Neal, then that is essentially one form of delivery, and digital is a different form of delivery.

Most of the kind of pure iPad plays have worked out only if they're newsletters, which is to say for a small, relatively tightly organized group of readers. But once it's really a newspaper, once it means to be a general, you know, an omnibus publication for a large group of readers, digital content goes to the various devices users want it to, and if you add too many distinctions in there, the user frustration goes through the roof, and it stops being worth the segmentation in the first place.

CONAN: We're talking with Clay Shirky, an associate professor in the Interactive Telecommunications Program at NYU, author most recently of an article called "The Year of the Newspaper Paywall." Denise Warren is also with us, senior vice president and chief advertising officer at the New York Times Media Group, general manager for NYTimes.com. We'd like to hear from you. Where you live, how are paywalls at newspapers changing things? Give us a call, 800-989-8255. Email talk@npr.org. Stay with us. I'm Neal Conan. It's the TALK OF THE NATION from NPR News.

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CONAN: This is TALK OF THE NATION from NPR News. I'm Neal Conan. Paywalls for news content still a matter for significant debate in the online world and indeed in newsrooms too. Meghan Peters from the social media and digital culture news blog Mashable recently called 2011 the year the paywall worked. Others push back, arguing paywalls only work in very specific situations for certain kinds of readers.

That may not be a bad thing on the national level at organizations like the New York Times and for local publications like the Honolulu Civil Beat. We want to know what it's like where you live. How have paywalls changed things? 800-989-8255. Email talk@npr.org. You can also join the conversation at our website. That's at npr.org. Click on TALK OF THE NATION.

Our guest is Clay Shirky, he's an associate professor at NYU; and Denise Warren, general manager of NYTimes.com. Let's go to Robert, and Robert's on the line with us from Fairfax, California.

ROBERT: Yes, hello. I've been a lifelong newspaper reader, and I used to - of course, I live in the Bay Area, so I used to get the Chronicle. And I love reading the New York Times online, and I did so for several years for free. And then when the New York Times started charging for it, I think I held out for a month or two, but I can go through 20 articles very quickly.

So I finally decided to pay, and I get the Sunday Times, the printed newspaper, and I pay for the digital content, and I'm happy to do so because when you think about it, I mean, most people, at least if you're over a certain age, you used to pay for newspapers all the time. You just took it for granted.

And certainly for the quality of the New York Times, I think it's well worth it.

CONAN: And I wonder, do you think, though, as a digital subscriber, you should be forced to see all the ads that everybody else sees?

ROBERT: Well, I'd like to see fewer ads. I do notice, because I was going to mention, too, that obviously people can get Yahoo! News and Google News, which are good news sources, but the ads on those sites just seem more obnoxious. So I don't know if the Times is trying to have a certain aesthetic standard for their ads, but yeah, fewer ads for people who are subscribing would make sense to me.

CONAN: Denise Warren?

WARREN: Actually, Robert, first let me thank you for being a loyal, long-term paying customer of the New York Times. We do appreciate your support. Yes, in fact, the New York Times does take its ad quality very, very seriously. We actually have an ad acceptability department that monitors the quality of advertising across all of our platforms.

We do take great measure to make sure that there's a balance between the advertising and its quote-unquote intrusiveness, or I think obnoxiousness might have been the word that you used, Robert, and we really are very careful about that because it is the entire user experience that really does matter to our customers. So that is very important to us, and I'm glad you've noticed it.

CONAN: But if there are digital subscribers like Robert, who is paying the five bucks a week or whatever it is, shouldn't he be maybe screened off from more ads?

WARREN: I think the real answer to your question, Neal, is the economics, as I said earlier, of producing the quality content that the New York Times produces. It's such that it demands both an advertising and a subscription revenue stream.

CONAN: All right, Robert, thanks very much for the phone call, appreciate it.

ROBERT: Thank you.

CONAN: Clay Shirky, you speculate, though, in your article that motivated readers like Robert are going to come eventually to want maybe different things than the 90 percent who will never subscribe.

SHIRKY: Right, there's actually been a very interesting conversation kicked off after I'd put out that piece, in which the New York Times public editor, Arthur Brisbane, who I should say does not speak for the New York Times directly, he's in an ombudsman role, but he asked about fact-checking. He asked should the Times become truth vigilantes, as he memorably put it.

And the pushback that he got on that idea of essentially how hard should we push politicians not to either bend the truth or sort of use weasel words to get around these issues, he had a kind of a sophisticated conversation about how, you know, how much leeway should we give them.

And the universal that came back from politically committed readers was none; we rely on you to go after the politicians and not allow them to essentially get away with distorted political speech. And when you see that kind of uprising - and it happened several times in a row because Brisbane went on to explain his point of view several times in a row, when you see that kind of uprising, you think there is unmet demand here in what those users want from the paper relative to what at least Brisbane's conception of the job is.

And when you get a paper that has an increasing integration of its social functions - the Times recently moved the comments directly onto the page with the articles, they've made the comments section more conversational, so user-to-user conversation is simply going to be more important and more engaged on that platform in 2012 than it was in 2011.

At the same time there is this small group of users for whom their commitment to the paper is significant enough that they're going to be handing over five bucks a week. And I'm speculating that when those two forces come together, you're going to see that group of people start to ask for things that are different from what the people just showing up to read the occasional business article or the occasional celebrity article are going to ask for.

CONAN: Denise Warren, is that part of the conversation at the Times? Yeah, go ahead, please.

WARREN: Yeah. As a matter of fact, we're not waiting for them to ask. We're starting to give products and services to our paying subscribers. So for example, last year we launched two apps. One was a politics app on the iPhone, and another was called the collection app, it's a fashion app on the iPad.

These apps will be no charge to our paying customers on those platforms. And you cannot access that content unless you are a paying subscriber. So you're starting to see us experiment with this as well. There's also subscriber newsletters that we are giving to our paying customers that help them understand the back-story behind some of the more significant news pieces that we are reporting on.

Again, this is only something that is going to our paying customers. So we're starting to do this already and experiment with that approach.

CONAN: We should also point out, I think your publisher said that in the event of a horrible event like 9/11, maybe that instead of 20 articles a month, that could be moved considerably upwards as people wanted to access stories on a situation like that. So this is flexible.

But I wanted to read this email from Russ in Berkeley: Unlike the Wall Street Journal, the New York Times is available on Google. Just go to the New York Times site, see a story you want to read, paste the headline into Google, and there's the full story for free. You can do this as many times as you'd like.

It's more hassle than subscribing, but not a lot. A friend of mine who works at the Times told me the paper is fine with people who do this because it ups the page views and hence increases the amount they can charge for ads. Denise Warren, is that true?

WARREN: Yeah, so when we originally were constructing the model, it was very, very important to us to do a number of things. One was certainly - obviously the business objective was to create a new revenue stream while maintaining a very robust and growing advertising revenue stream.

But equally as important was our mission, and it was incredibly important to us that we remained open to the Web. We had, as you noted earlier, an experience with Times Select, where this was many years ago, it generated over $10 million in revenue, so it was a successful model, but what we learned form that experiment was that a certain number of our very important voices, mostly our opinion journalists, were quote-unquote walled off from the rest of the Web.

And we did not think that moving in that direction really made a lot of sense for the New York Times. So one of the core principles for executing this model was to remain open to the Web. So we were very generous with the number of articles that users can access, as well as remaining open to search and social and all the referral points back to the New York Times.

When we first launched, there was a lot of discussion and debate about this approach, and we took a lot of criticism for it, and there was a lot of quote-unquote gaming of the system. But nine months later, I can tell you that we really haven't seen a lot of people manipulating URLs or cutting and pasting. We haven't seen a very big difference, you know, in terms of that now versus prior to launching.

I think, you know, the basic headline here is that most of our users are honest, most of them are going to sort of abide by the rules that we've laid out, and they don't really want to work that hard, if they really want to read an article, to go back to Google and, you know, continue to operate that way.

CONAN: Denise Warren, thank you very much for your time today, we appreciate it.

WARREN: Thank you for having me.

CONAN: Denise Warren, senior vice president and chief advertising officer at the New York Times Media Group and general manager for NYTimes.com. And as we mentioned, Clay Shirky, it's not just the Times, it's not just the Wall Street Journal. The Journal and the Financial Times always seen in a special category, business news, time urgent, they had proprietary information people were always willing to pay for. But it is more now - fairly large regional papers.

SHIRKY: Right, well, so - and this is I think the thing that finally - the newspaper industry moves in a pack because in a way they've all had the same business model for so long. They've all looked for some kind of synchronized solution to the current economic problem.

And so when an individual paper would have an individual experiment, it would be regarded as interesting but not evidence of anything. Now that you've got the Sun Times in Chicago and the Star-Tribune in Minneapolis and so forth experimenting with this model, you - I think we're starting to see real movement away from the classic paywall of you pay me or you don't read it to this kind of metered threshold where if you're a casual reader, we're going to treat you as useful for the advertising base.

But if you're a passionate reader, past a certain point we're going to ask you to support the mission of the paper as a whole, and this is exactly the same surprise as when Radiohead puts up an album for free and asks people to pay, or Louis C.K., the comic, puts up a show for free and asks people to pay, is that people actually do it. They actually pay for it because they think it's the right thing to do - not in a completely bloodless I'm-calculating-an-economic-transaction way, but because they care about the person or the institution on the other side of the browser page.

And that, I think, is - that - this is going to be, now, a big sorting out for American papers, between those papers for whom readers have, as you said in the article, what I call the God forbid reaction, right? God forbid, the Chicago Sun Times go out of existence. The people who feel that way are going to be disproportionately likely to support the Chicago Sun Times, not just because they think I'm buying content and that's what I used to do when it was on paper, but because they think of themselves as supporters, as people who care about the institution as a whole.

CONAN: Yeah, yeah. Radio, a hot medium. People subscribe to National Public Radio because they think Scott Simon is terrific, or Robert Siegel is terrific, or Renee Montagne is terrific, all those people. There's this emotional bond with this medium. Newspapers, a cool medium.

SHIRKY: Well, so this then gets into the big open question, which is the hollowing out of the American metropolitan newspaper between 1980 and now, where a majority of the content for the kind of mid-sized metro daily papers for towns of 100, 200,000 people. They're not so small that they're just doing community news, but they're not so large that they can cover everything the way The New York Times famously can. And those papers are often a - made up of a majority of wire service content and, you know, Sudoku and astrology. Sudoku and astrology are not categories that anybody has a local monopoly on.

CONAN: No. And they're - they are available for free.

SHIRKY: Right. And so we're going to start to see newspapers sorted on this kind of hot-to-cold spectrum that McLuhan first introduced. People who have a passionate relationship with a particular paper or - are going to be the people disproportionately likely to support it. But if you turn that around, papers that are good at not just delivering a product that users were willing to pay for when it was printed, but papers that are good at actually getting people in their town or city to say, I like this institution, I'm committed to it in a hot way. Those papers are going to be disproportionately better positioned to survive this transition than the people who've just been bundling the AP newswire and a bunch of comics from, you know, a syndicated service and wrapping it inside a thin veneer of local news. Those papers are going to suffer.

CONAN: We're talking, of course, about Marshall McLuhan, the media theorist of the 20th century who - I guess his best-known book was "The Medium is the Massage." You can hear the pun in there. Clay Shirky is our guest on TALK OF THE NATION from NPR News.

And let's go to Rod. Rod is on the line with us from Denver.

ROD: Hi. Love your show, Neal. It's fantastic.

CONAN: Thank you.

ROD: Unfortunately, a lot of the pay scale started to happen during the worst economic downturn. I feel that I have become less informed because of my inability to pay for The New York Times. And I love The Times. I love it. But my statement is this, that because I've become less informed by The Times and not being able to read as much, the Denver Post here in my area has picked up the slack a little bit in the fact that it's put more Facebook posts out there, and I'm able to access it better that way, and I feel more informed that way. That utilizing social media and maybe apps, you know, is one of the things that The New York Times needs to, you know, maybe look into more. And I'll take my comment or my answer off the air.

CONAN: OK, Rod. Thanks.

SHIRKY: Great. Thank you, Rod. Yes. This gets to what Denise was talking about, I think, which is papers really have two missions. There is no such thing as the news business. There's only the advertising business, which used to cross-subsidize news, right? So the old hook model was you write about the football team so you could take money from the car dealer and give it to the guy on the city desk. And it was crazy system, but it also worked for a really long time.

Now that the economic model that supported that is under, you know, debilitating pressure from the Web, papers have to rebalance how much of what they're doing is about pursuing the revenue that supports the mission, and how much of it is about broadcasting the results. And I think everybody looked at what happened to The Times and Sunday Times, which are very significant papers in the political conversation in the United Kingdom. And after they went by the paywall - even more dramatically than what Rod is talking about with The New York Times - just large parts of what The Times and Sunday Times published never resonated with the general public.

So there is now this tension, and Rod's got it exactly right. If you put out everything to everybody, you cannot generate a real stream of revenue from your most passionate users. On the other hand, any threshold is going to cut off some number of people who would be interested in reading more, but are not, for one reason or another, going to come up with $5 a week, or whatever it is that The Times is asking for. And that re-alignment is actually, I think, going to be a really big shift in the newspaper environment. Because, as he said, the Denver Post, may, in fact, be able to goose its advertising revenues better by staying more free longer and picking up some of the territory The Times cedes.

So the - instead of saying, the whole newspaper industry is now going to adopt this one new business model - we're just going to move from point A to point B - I think you're going to see this big scattering of some papers using social media better, as Rod was saying, others pulling back from it. Some papers charging more, other papers charging less. And it means that the whole, essentially, the assumed business model that lay under every newspaper in the United States is breaking up, to be replaced not by a different business model, but by a whole range of business models around how open or closed they want to be.

CONAN: Well, one final note, this email, I guess, from Martin: I'm a college student in Minnesota, studying computer sciences. I've been highly involved in the Occupy movement and pay a vast amount of attention to anonymous actions. I get the majority of my news on Twitter before it gets released by most major news networks. Why should I pay for news I've already received for free? Just food for thought.

SHIRKY: I mean, the reason you pay for news is to get the news that you haven't received for free. So Twitter's the source of news in two different ways. Some of it is truly, genuinely, breaking news, right, if you subscribe to any of the Occupy feeds because many New York City police forces have actually made a practice of arresting journalists, which is, you know, I think an affront to the First Amendment but certainly part of the recent tactics, then finding out what the occupiers themselves are saying as they're being cleared out is the way to get direct news. But sometimes you need an institution to commit to doing the investigation in a way that isn't going to show up on Twitter. And that's the kind of thing we rely on The New York Times to do.

CONAN: And one final fact check here, and this is from Ross on an email: Louis C.K. did not offer a show for free. He offered it for $5 though he did not put a digital lock on the copies for real. So thank you for that correction. Clay Shirky, thank you very much for your time.

SHIRKY: Thank you. Thank you, Neal, for having me.

CONAN: And when we get back, the opinion page. Stay with us. It's NPR News. Transcript provided by NPR, Copyright National Public Radio.